Los Angeles City School Dist. of Los Angeles County v. Landier Management Co.

• Court: California Court of Appeals
• Citation: 2 Cal.Rptr. 662,177 Cal.App.2d 744
• Decision Date: 09 February 1960
• Parties: LOS ANGELES CITY SCHOOL DISTRICT of Los Angeles County; Los Angeles City High School District of Los Angeles County; and Los Angeles City Junior College District of Los Angeles County, Plaintiffs and Respondents, v. LANDIER MANAGEMENT COMPANY, a corporation; Landier Investment Company, a corporation; Landier Transit Company, a corporation, Crown Body and Coach Corporation, a corporation; Bank of America National Trust and Savings Association, a National banking association; and Felicien P. Landier, Defendants. Landier Investment Company and Felicien P. Landier, Appellants. Civ. 24037.

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2 Cal.Rptr. 662 177 Cal.App.2d 744 LOS ANGELES CITY SCHOOL DISTRICT of Los Angeles County; Los Angeles City High School District of Los Angeles County; and Los Angeles City Junior College District of Los Angeles County, Plaintiffs and Respondents,
v.
LANDIER MANAGEMENT COMPANY, a corporation; Landier Investment Company, a corporation; Landier Transit Company, a corporation, Crown Body and Coach Corporation, a corporation; Bank of America National Trust and Savings Association, a National banking association; and Felicien P. Landier, Defendants.
Landier Investment Company and Felicien P. Landier, Appellants. Civ. 24037. District Court of Appeal, Second District, Division 1, California. Feb. 9, 1960.
Hearing Denied April 6, 1960.

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[177 Cal.App.2d 747] Kasch & Cook, Leo M. Cook, Ukiah, for appellants.

Harold W. Kennedy, Co. Counsel, Wm. E. Lamoreaux and Clarence H. Langstaff, Asst. Co. Counsel; Jerry F. Halverson, Deputy Co. Counsel, Los Angeles, for respondents.

LILLIE, Justice.

The present proceeding grew out of various contracts entered into during the years 1948 and 1950, between the plaintiffs and defendant Landier Management Company, for the transportation of the pupils of plaintiff school districts. Within a year following the letting of the last contract, it was represented to the plaintiffs that three members of their governing board had an interest contrary to law in the subject of certain of the aforesaid agreements. Accordingly, in November of 1951, plaintiffs filed an action for declaratory relief wherein the asserted interest was set forth and wherefore it was prayed that the contracts in question be declared void ab initio and they recover the entire sum paid out thereunder, amounting to $1,548,852.74. The Landier defendants appeared by way of answer, which included a denial that the three members' participation in the several transactions constituted an 'interest' proscribed by California statutes. Much of the then pertinent law is discussed in People v. Becker, 1952, 112 Cal.App.2d 324, 246 P.2d 103, and People v. Elliott, 1953, 115 Cal.App.2d 410, 252 P.2d 661, which sustained the removal from office of two board members mentioned in the complaint for declaratory relief.

The action was noticed for trial on May 27, 1952, and thereafter continued from time to time; finally, on March 18, [177 Cal.App.2d 748] 1954, trial was set for August 17, 1954. Meantime, in the early part of 1953, negotiations for settlement were in progress between plaintiffs' counsel and separate counsel for Landier Investment Company and F. P. Landier (appellants herein), and the other Landier defendants respectively. These negotiations are reflected by certain correspondence which was considered by the court below and which has been made a part of the record on appeal. One proposed settlement formula would have involved payment to plaintiffs of the excess profits (approximating $123,000) over and above those profits considered to be fair and reasonable by a board of experts. This proposal was rejected, as it did not constitute a return of all profits realized under the contracts; and it was stated by plaintiffs' counsel that 'unless a far more substantial settlement is made, the public policy would appear * * * to require the Courts * * * to decide what amounts the School Districts should recover.' Thereafter, by letter dated June 22, 1954, the attorney for Mr. Landier and Landier Investment offered to pay the sum of $264,776.86 in yearly installments of $33,097.11 without interest on principal or installments, and declared that 'the amount of the judgment, if the plaintiffs were successful * * * would necessarily be the amount prayed for * * * or over $1,000,000.00,' and would compel the institution of bankruptcy proceedings to obtain relief therefrom. Negotiations for settlement continued. As a result, by letter dated July 7, 1954, plaintiffs' counsel sought approval by plaintiffs' governing board of 'a formal offer (from defendants) to settle this litigation as to all of the defendants.' Under a proposed stipulation contemplated thereunder and to be executed by all parties, defendants F. L. Landier and Landier Investment Company would pay the total sum of $264,776.86, without interest upon principal or any installments, in the following manner: one-eighth thereof, or $33,097.11, on the twentieth day of October of each year, commencing October 20, 1955, until the whole amount was paid, the action then to be dismissed as to the other defendants. Included in the stipulation would also be a provision that in the event of default in any payment for a period of thirty days, after thirty-day notice of such default, without further notice, judgment could be entered against defendants F. P. Landier and Landier Investment for twice the unpaid

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balance. Acceptance of the offer was recommended by plaintiffs' counsel to their governing board for the following reasons: '1. It is substantial, exceeding one quarter of a million dollars. 2. It provides an economic sanction for [177 Cal.App.2d 749] failure to meet the payments. 3. It would pay to the School Districts all profits which have been made under the four contracts. The settlement would therefore remove all profit from these contracts.'

As to the possibility of defendants' relief from their obligation by way of discharge in bankruptcy, the letter declared that 'it seems to us that those possibilities are as well covered in this settlement as they can be in business transactions of this sort,' adding: '(t)he threat of a judgment in the amount of twice the unpaid balance due on the settlement is just about as potent an economic weapon as the Board could have to enforce payment of the full amount provided by the settlement.' Counsel for defendants gave written approval of this letter which 'constitutes an accurate statement of the offer to settle the subject litigation which is hereby confirmed by Mr. F. P. Landier and Landier Investment Co.' On August 17, 1954, a 'Stipulation for Settlement' was executed by a representative of plaintiffs' governing board, defendant Landier (for himself and Landier Investment) and the attorneys for all parties concerned, and thereafter filed with the court; subsequently the action was dismissed as to defendants Landier Management and Landier Transit and marked 'off calendar' as to F. P. Landier and Landier Investment.

Three payments, totalling $99,291.33, were subsequently made. In...